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    Rights statement: This is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, 52, 2017 DOI: 10.1016/j.irfa.2017.04.011

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Equity premium estimates from economic fundamentals under structural breaks

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Equity premium estimates from economic fundamentals under structural breaks. / Smith, Simon C.

In: International Review of Financial Analysis, Vol. 52, 07.2017, p. 49-61.

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Smith, Simon C. / Equity premium estimates from economic fundamentals under structural breaks. In: International Review of Financial Analysis. 2017 ; Vol. 52. pp. 49-61.

Bibtex

@article{ff7c77ed66214a34996040988f666430,
title = "Equity premium estimates from economic fundamentals under structural breaks",
abstract = "Abstract This article compares three estimates of the conditional equity premium using dividend and earnings growth rates to measure the expected rate of capital gain. The premia are estimated using a theory-informed Bayesian model that admits structural breaks. The equity premium fell from 8.16{\%} in 1951 to 1.15{\%} in 1985. Approximately half of this decline was reversion of a high conditional premium to the long run mean and the remainder resulted from a decline in the expected stock return. The decline in the expected stock return was largely driven by the Fed Accord (1951) and the Fed’s ‘monetarist policy experiment’ (1979–1982).",
keywords = "Equity premium, Structural Break, Bayesian analysis",
author = "Smith, {Simon C.}",
note = "This is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, 52, 2017 DOI: 10.1016/j.irfa.2017.04.011",
year = "2017",
month = "7",
doi = "10.1016/j.irfa.2017.04.011",
language = "English",
volume = "52",
pages = "49--61",
journal = "International Review of Financial Analysis",
issn = "1057-5219",
publisher = "Elsevier Inc.",

}

RIS

TY - JOUR

T1 - Equity premium estimates from economic fundamentals under structural breaks

AU - Smith, Simon C.

N1 - This is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, 52, 2017 DOI: 10.1016/j.irfa.2017.04.011

PY - 2017/7

Y1 - 2017/7

N2 - Abstract This article compares three estimates of the conditional equity premium using dividend and earnings growth rates to measure the expected rate of capital gain. The premia are estimated using a theory-informed Bayesian model that admits structural breaks. The equity premium fell from 8.16% in 1951 to 1.15% in 1985. Approximately half of this decline was reversion of a high conditional premium to the long run mean and the remainder resulted from a decline in the expected stock return. The decline in the expected stock return was largely driven by the Fed Accord (1951) and the Fed’s ‘monetarist policy experiment’ (1979–1982).

AB - Abstract This article compares three estimates of the conditional equity premium using dividend and earnings growth rates to measure the expected rate of capital gain. The premia are estimated using a theory-informed Bayesian model that admits structural breaks. The equity premium fell from 8.16% in 1951 to 1.15% in 1985. Approximately half of this decline was reversion of a high conditional premium to the long run mean and the remainder resulted from a decline in the expected stock return. The decline in the expected stock return was largely driven by the Fed Accord (1951) and the Fed’s ‘monetarist policy experiment’ (1979–1982).

KW - Equity premium

KW - Structural Break

KW - Bayesian analysis

U2 - 10.1016/j.irfa.2017.04.011

DO - 10.1016/j.irfa.2017.04.011

M3 - Journal article

VL - 52

SP - 49

EP - 61

JO - International Review of Financial Analysis

JF - International Review of Financial Analysis

SN - 1057-5219

ER -